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Gift for AT&T shareholders
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September 13, 1996: 11:20 a.m. ET
Spinoff of Lucent is a windfall for those who own AT&T stock
From Correspondent Allan Dodds Frank
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NEW YORK (CNNfn) -- If you are one of the 3.3 million shareholders of AT&T Corp., you're about to get a present - it's called a spinoff.
In about two weeks, all AT&T shareholders will receive stock in a recently formed company called Lucent Technologies. If you hold 100 shares of AT&T, you will receive 32 shares of Lucent plus a little cash. You won't have to pay tax on it, either.
So what should you do with that new stock? Hold it or sell it?
"Anyone who has AT&T should hold the Lucent shares," financial planner L.J. Altfest said. "It's cutting its cost … and its products are very high quality."
Even though it has only been around under the Lucent name since April, the equipment technology company is really the guts of the old Ma Bell, the telephone pioneers.
With Bell Labs at the center of its corporate structure, Lucent has already become a market leader in switching, transmission, wireless networks, corded and cordless phones.
The spinoff temporarily creates a second form of AT&T stock, called when-issued shares.
They'll be labeled AT&T WD in the stock pages and will reflect the value of AT&T minus the spun-off company. So investors have a chance to buy stock in both of the restructured companies before the divestiture is complete.
"People shouldn't hesitate to buy because of the 'when-issued' status," Altfest said. "It really doesn't create any additional risk."
The other question investors are asking is, "Where does this leave AT&T?"
"I think once you get Lucent stripped out of it, and once it divests NCR … there's a lot of value in the leftover company, which is essentially a long-distance company and a cellular company," said Richard Klugman of PaineWebber.
The spun-off Lucent shares will go to everyone who holds AT&T stock bought before Sept. 17.
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